This may look like a mess, but the last few "bars" on the chart are holding some useful information!
I'm sure I'm not the first one on here to think of this. My apologies for the messy work though, because the chart gets scrambled when you move it, the text moves all over the place and the calculations are probably completely wrong, but I'm sure you get what I'm trying to do here.
Trading currencies that are gaining strength against currencies that are losing strength is obviously a good way to go, so this is an attempt to illustrate the increase/decrease in strength of a currency compared to 7 others, to help filter out those bad trades and get us into good ones for many pips of profit.

Now check out the chart. How often a year does a currency significantly change direction? Who out there was/is still shoring the USD, AUD and CAD and buying the EUR, JPY and CHF on the hourly, 4-hourly and daily TF's right now?

I know I haven't. I have been and will be only buying CAD, AUD, USD and now also GBP and NZD and I will be only selling EUR, JPY and CHF until the direction significantly changes. Which could of course happen at any time for all I know and when it does we look to trade that currency only the other way and count the money we made on the long run we just had!

The strengthening and weakening of a currency as you can see can last for months. Realising this changed my trading forever.

My interpretation of the chart: Currencies that are significantly sloping away from eachother are candidates for trend trading. Currencies that run paralel to eachother are ranging and can be traded from the top of a band or channel to the bottom with confidence.

As the chart shifts everything seems to get scrambled and the text won't display right behind it. But you probably get what I'm trying to say here, right? The calculations are probably very wrong. But still it works for me and I thought maybe some of you may find this idea interesting too :P

Thanks for your chart. This is a performance chart of the differents currency index. Your interpretation is good, you have to find the negative correlation between the differents currency index to find the acceleration points resulting from the combination of two indexes to build the currency pair. Indeed we have being developing a software based on this tool and that calculate quantitatively the correlations of each index, if want more info just email me at: augusto.hernandez@highwave360.com

It is a great idea, and absolutely useful for inspecting the trend. Is it possible to get the script for using in TradingView charts under different conditions. For example, at different time frames, or overlaying on charts to see how it can predicts the trends.

I have been receiving PM's about what script is used and so on, so I thought I would clarify. There is none. Again, there could be a better way, but this works great for me.
You can easily duplicate this chart yourself for use on other timeframes and so. In the upper left corner of the chart you can see what I did. I added up all pairs containing a currency. For USD for example, you add pairs wherein your currency is the BASE currency by using "+USDJPY" and If it's the QUOTED currency, you will have to divide it's value by the BASE currency's value, which is obviously always "1", so you use "+1/EURUSD".

So you get something like this:
EURUSD+1/USDJPY+1/GBPUSD+1/AUDUSD+1/NZDUSD+USDCAD+USDCHF

Enter this in tradingview, and click on "line chart" instead of "bar chart" and you'll have what I believe to be a pretty reliable visual representation of the USD's strength, over time, weighed against 7 other currencies.

Now click on the compare button in the upper navigation bar and enter your next currency, for example EUR:
EURUSD+EURJPY+EURGBP+EURAUD+EURNZD+EURCAD+EURCHF

Choose a color and hit compare again! You get where am getting at, right? This is JPY:
1/EURJPY+1/USDJPY+1/GBPJPY+1/AUDJPY+1/NZDJPY+1/CADJPY+1/CHFJPY

This is really fantastic, and so simple. When I recreate it, I cant replicate all of the lines originating from a central point on the left hand side axis, like you have above. Any ideas on achieving this? Thanks

this is absolutely great. I remember that I once watched a video where someone held a web conference and was showing this exact same chart. He never said how he got this chart. I started looking for this and never found and indicator for this. After 8 years, I came across your post. I am going to give this a try. Thank you.

Guys, thank you all for your kind responses. I have been expanding on the concept a little. You guys might want to check this multi timeframe version. I posted it here, but unfortunately the formulas are visible in the background, so here's a direct link to the chart also. If you're a pro user, it should display correctly.
New post on the subject:

Standalone chart (can be used as a dashboard): https://www.tradingview.com/e/EtXjrknx/

That's really well said, Max! I can't really answer this question. It all depends on how long term you want your trades to be. I like to look at 1-6 month charts for my long term setups, but you can look at this in lots of different ways.

Just enter a formula and then press the compare button and add another.
For USD, try: USDJPY*USDJPY*1/EURUSD*1/EURUSD*1/GBPUSD*1/GBPUSD*USDCAD*USDCAD*1/AUDUSD*1/AUDUSD*1/NZDUSD*1/NZDUSD*USDCHF*USDCHF
Make it a line graph by clicking on the cog button.
Then try to add AUD by clicking compare and entering: AUDUSD*AUDUSD*1/EURAUD*1/EURAUD*AUDJPY*AUDJPY*1/GBPAUD*1/GBPAUD*AUDNZD*AUDNZD*AUDCAD*AUDCAD*AUDCHF*AUDCHF
Note that tradingview has it's limitations. The actual formula for calculating correlations like this isn't allowed by tradingview, but I believe it should be something like this: Calculate: a × b, a2 and b2 for every value, then sum up a × b, sum up a2 and sum up b2 and then divide the sum of a × b by the square root of .
Because tradingview doesn't allow this I chose to post it like I posted it. By now I found the above to work even better, so I suggest you try that.
Here's a link to what it will look like (you might need to zoom in a little): https://www.tradingview.com/chart/lOrpBUBQ/
Good luck!

Is anybody on this thread still? I have been putting some thought into this. First, I think the arithmetic is not approached quite right. I believe that you must add the currency pairs as you would fractions, with a common denominator, and then take the inverse of that sum. For example, the USD Sum agrees with the US Dollar Index when approached as:

USD Sum = 1/(EURUSD+GBPUSD+AUDUSD+NZDUSD+1/USDCAD+1/USDJPY)

Following that, then the EUR Sum

EUR Sum = 1/(1/EURUSD+1/EURCAD+1/EURGBP+1/EURAUD+1/EURNZD+1/EURJPY)

and so on... I took this approach when I noticed the shapes of the USD sum and the USD index were in big disagreement. My first thought was that the fractions aren't added right.

This makes sense to me... just take an example with any numbers and look at the sums, you would add them as I have above, rather than adding with common numerators, and differing denominators. It seems as though this is more along the lines how the US Dollar Index is calculated, judging by the agreement in curve shape. I have a nice illustration, just no way to put the picture up...

Perhaps you could cut and past the different symbols into tradingview:

You will see way better agreement between the inverse of the proper sum and the US Dollar Index, than with the sum with USD in the numerator (remember a fraction is a numerator over a denominator and you want to add fractions with a common denominator).

Either way gives you a great idea which currencies are broadly weak, strong, or stable. I have had great results since I started using this as a stepping stone to decide on pair and direction, then finding setups from there.

Tradingview takes the reciprocal automatically... so as entered "1/EURUSD" will be the same curve as "USDEUR" that's a really cool feature.
So the currency strength plot will be more straight forward to enter.

I think I agree with what you're saying, but not sure. Are you saying the original posters equation for say GBP is adding equations with denominators of different variables? So it would be like adding (x/y) to (y/x) and skipping the step to make the denominator the same?

Ok haha, let's me explain a bit further. And instead of using quotes we can just use simple fractions. But to start, in original equation you're adding GBPJPY to GBPUSD and so on, so you're adding different currency values like Yen to USD. It still gives an idea of the movement of currencies but you're right, it's probably not as accurate as it could be. Ok, let's use a simple fraction example to make sure we're saying same thing. Basically original math is saying like (1/3) + (3/1) = 4/4 (adding both denominators directly). When In reality the proper fraction addition would be (1/3) + (3/1) = (1/3) + (9/3) = 10/3 ? Let me know

This indicator is along the same lines as the one I developed for commercial purposes. My AccuStrength currency strength meter is windows software and will give you more options, but the general idea is the same. Paying attention to the actions and reactions of the various currencies on their own just makes sense. Whether a currency trader gets a free, or commercial strength chart, it is a valuable tool to have. More data to make a decision with. No. It is not a magic gizmo. It should be a crucial part of every forex strategy.

Great work! Tx a lot, i have compared the currencies, but the problem im facing is that in the left axis scale, the start point of the lines not appear at 0%, they appear all in random places do you know how to fix it?

Would the idea be that you would trade an appropriate currency pair? For example, if the USD is showing strong and the JPY is showing weak, you would trade the USD/JPY pair, going long? Or if CAD is strong and USD is weak, you trade the USD/CAD, going short?